Interview with the Co-Founder & CEO, Lendingkart.

Small and Medium Enterprises (SMEs) in India are able to access fast, short-term loans via LendingKart, one of the best lending technology innovations of the Fintech Industry. Harshvardhan Lunia, Co-Founder & CEO, Lendingkart Technologies Pvt. Ltd., gives us a good understanding of their business model and their success story. Also with special advice for the upcoming fintech startups; A new fintech startup should “build a niche product that is transparent and credible that has the capability to be sustainable over a long period”.

1) How did Lendingkart start and where did the idea come from?

Before starting Lendingkart, Mukul and I (Harsh) interacted with several SME owners and vendors to understand their needs and requirements. Through our multiple interactions, we realized that the biggest pain point which most of the SMEs are facing is the availability of capital. India is a hugely under-served lending market of SME borrowers. Formal sources only cater to 22% of the total MSME debt financing. In the absence of a formalized source of credit,these small businesses seek finance from money lenders, shroffs and family which comes with its own share of constraints. Even if there is a provision for loan between the ranges of Rs.50,000 to 10 lakhs, they are asset based loans provided for auto, commercial vehicles, home loan, educational purpose, etc. But loan for shorter term and of medium – size value is hardly being offered by any financial firm. This was where we thought the need of building a comprehensive online lending platform dedicated to help entrepreneurs and small businesses with Working Capital Finance.

2) What is your current business model?

Our usual process requires applicants to visit Lendingkart Group website at www.lendingkart.com to apply for the loan. They then need to give background information and upload minimum documents. Those documents are then handed over to our NBFC that verifies and transfer to its analytics team to determine the credit worthiness of the applicant. The entire process is integrated with technology and the NBFC disburses loan within 72 hours from thetime of application. We charge a nominal processing fee and interest rate that depends on the risk profile andcreditworthiness of the applicant.

3) What makes Lendingkart loans different from those given by banks and other companies such as Capital Float?

The industry has witnessed entrance of several players given the huge potential in the ecosystem. However, technology can be the biggest game changer in this sector and that is where Lendingkart is banking on. Our key USP lies in the way we have designed our products and processes that was formulated with the learnings from the pilot loans offered to MSMEs. We developed our services on four key pillars – Without human intervention (subjectivity and last mile fraud), Instant (money when needed), Simple (no dependencies on intermediaries); and Hyper-flexible (terms for repayment and renewal). These services stand on the bedrock of cutting edge technology that has defined Lendingkart’s leadership in the fin-tech space in India.

4) Lendingkart has grown rapidly, expanding its reach to 462 cities across India. What has been the key to the company success?

Lendingkart Group was started with the sole motive of offering easy and convenient financing options to the large Indian SME sector that does not have access to easy credit. Over 1.0 lakh borrowers have reached out to Lendingkart Finance for their credit needs in the last one year alone. Technology has been the back bone of all we do at Lendingkart Group as we constantly innovate towards a more seamless and automated loan disbursal process.

5) What factors do you consider before lending?

At Lendingkart Group, we have developed technology tools based on analytics and big data to facilitate Lenders to evaluate their client’s business. There is enough data available to determine a customer’s intent to pay back a loan, quality of his product/service, financial health of his business, and ability to survive with competition etc. We don’t ask the customer to ‘Fill large forms’. The data could be scraped from public/private sources, APIs. Over 2,200+ variables are assessed to determine the financial health, comparative market performance, social reliability and compliance to statutory requirements to facilitate the Lenders to determine the credit worthiness of SMEs.

6) What is the repayment discipline?

Our loan repayment options are flexible depending on the loan size and creditworthiness of the borrower. An average repayment cycle for an SME ranges from anywhere between six months and one year.

7) Last month Lendingkart announced it aims at reaching out to 10,000 businesses in the SME space within six months. What plans are there to ensure the company achieve that goal?

We aim to increase our presence in offline retail segment and widen our reach into the 1000+ towns and cities in India. It is evident from various studies that there is lot of un-served credit demand in SME segment, which traditional financial institute fail to cater to. We as digital lender, need not open branches to cater to these customers and can expand quickly, where primary source of credit are money lenders, friend & family, and other informal channels.

8) How have things changed since Lendingkart raised $32M in Series B funding last year?

Over the last six months, we have grown exponentially and expanding our services to over 500 cities. Disbursing over 6500 loans in small towns and cities across India, we have covered over 29 states in the country and truly driving financial inclusion for thousands of people in the SME space. With over 100 channel partners supporting our effort, the endeavour is to reach out to 10,000 businesses in the SME space in the next six months.

9) Last year, Lendingkart partnered with Craftsvilla, Wydr and Unicommerce. What benefits do you see in partnering with these companies?

Our tie-ups with several B2B e-commerce platforms have widened our consumer base while ensuring that maximum retailers and e-commerce vendors can avail our services. This has received a positive response as they now feel more strengthened and are working towards enhancing their services and businesses rather than worrying about gaps in their cash flows.

10) Recently, Lendingkart announced it will offer its credit risk assessment technology to banks and other alt-lenders starting this year. How will that benefit the company?

We aim to increase our reach across various credit product, geography and customer segments by monetizing our data analytics and credit scoring platform, which other lenders can use to evaluate the credit worthiness of borrowers. Also, it will help us to disburse more loans without increasing our book size thus, increasing returns of assets for us.

11) What are some of the challenges that Lendingkart is facing?

Banks and formalized financial institutions are only accessible in the top 250 or 300 cities in the country. While 65% of India’s business comes through these 300 cities, there is also close to 4,300 to 4,700 other smaller cities and trade hubs across the country which are contributing to close to 35% of India’s GDP but do not have access to formal credit options. We face lack of hardware, digital infrastructure, and illiteracy as big challenges to reach out in remote towns and villages of India. With smartphones coming into budge of small entrepreneurs and various initiatives by government to strengthen digital infrastructure will solve first two challenges. For illiteracy, adopting to mobile way lending in vernacular language would eliminate this barrier.

12) What’s next for Lendingkart? / What do you see happening in the fintech industry in 2017?

The phenomenal growth and expansion seen by digital payment solutions like PayTM, Ola Money and MobiKwik across diverse industries from daily commutes to buying necessities from the local kirana shops to paying for utilities like electricity and fuel says a lot about how quickly India is adopting these new age digital transaction mechanisms. The success is not only limited to payment wallets, the FinTech industry overall, has been put on an accelerated growth path. India is today witnessing its very own ‘FinTech Moment’. From a situation, earlier this year where companies in the FinTech space were competing with traditional banks and NBFC’s, today we are looking at a more collaborative effort across all spheres – remittances, consumer acquisition, credit creation and Unified Payments Interface platforms among others. The biggest characteristic of the online lending industry has been the supply constraint. With demonetisation pushing the envelope, platforms offering alternative and digital lending solutions are now uniquely positioned to play a significant role in aiding the growth of the SME sector. At Lendingkart Group too, we realize the importance of building our tech capabilities that aligns with the largely underserved SME lending market and at the same time look at scaling up both in terms of number of borrowers and geographical reach of our product.

13) We have noted that you studied at the Indian School of Business. In your opinion, is a business course the most appropriate course to study if an individual wants to enter into the fintech industry?

The Fintech industry currently needs diverse talent from various domains including finance, marketing and technology. Although a relevant business management course helps to develop managerial and administrative skills in an individual, this is not an absolute pre-requisite to succeed in this industry. An innovative mind that has the capability to understand the nuances of business and its objective is what the industry is looking for.

14) What advice can you give entrepreneurs who want to venture into the fintech sector in the future?

The Fin-tech sector is an exciting space and the market is growing exponentially making it lucrative entrepreneurial options for many young professionals. However, with the presence of so many players within various domains of the fin-tech ecosystem, what will stand out is the capability to build a niche product that is transparent and credible that has the capability to be sustainable over a long period.